FM LETS GOOD TIMES ROLL

FM LETS GOOD TIMES ROLL
The Economic Times, July 28, 2009, Page 1

India Inc tax sops to propel growth

With an eye on 8% growth amid difficult times, FM continues to pull out more goodies for India Inc and the aam aadmi. While industry got a slew of tax breaks, housing dreams of millions of Indians came closer to reality

Our Bureau NEW DELHI

THE government has lowered the interest rates on loans for affordable housing, extended a tax holiday given to industrial parks, and lifted the tax burden off road repair costs, adding to the four existing stimulus packages in its effort to propel GDP growth to 8-9% by the end of 2010.

Finance minister Pranab Mukherjee on Monday told Lok Sabha that home loans up to Rs 10 lakh for properties with a market value not exceeding double that amount will now come with a 1% subsidy on the interest charged by commercial banks.

The minister has earmarked Rs 1,000 crore for this, a step expected to give a leg up to lower and middle income families looking to buy a house.

Mr Mukherjee proposed an amendment to the Income-Tax Act so that profits from housing projects approved by a local authority between April 1, 2007, and March 31, 2008, will be tax-free if they are completed before March 31, 2012. He urged builders to pass on the benefit to consumers.

Renu Sud Karnad, joint managing director of HDFC, said the interest subsidy on home loans will result in increased activity in the affordable housing segment and creation of employment. “With the real estate segment directly and indirectly supporting 269 big and small industries, it will have a positive impact on the economy. Also, with the fear of below-normal rainfall looming, a step like this is a well-timed, well-thought one,” she said.

Companies working out of industrial parks can now plan long term, with tax breaks being extended by two years to March 31, 2011. Accordingly, profits from development, operation and maintenance of industrial parks will continue to be tax-free.

Industry body Ficci welcomed the measures saying these, along with the fiscal steps introduced in the Budget for 2009-10 and the stimulus packages rolled out earlier, will give a new momentum to the economic recovery currently underway.

STIMULUS UNLIMITED

FOR INDIVIDUALS
1% interest subsidy for loans up to Rs 10 lakh for a year, provided purchase price is up to Rs 20 lakh
Tax deduction on interest paid on education loans for legal guardians
I-T deductions for assessees with severe disability raised from Rs 75,000 to Rs 1 lakh

FOR INDUSTRY

Extended tax holiday for special investment zones

Tax break for realtors extended by three years

Food processing tax incentives to cover milk & meat industry

Coal bed methane gas to get tax holiday

Service tax waiver for road repair & maintenance services

Tax on new services from September 1

As part of its continuing efforts to generate activity in the infrastructure sector, the government exempted repair and maintenance of roads from service tax, a la construction of new roads. The tax break will be available immediately.

“We can push domestic demand with stimulus measures. But it is very essential that exports, which are now in the negative territory, should turn positive for faster economic growth,” said DK Joshi, director and principal economist, Crisil.

In a step that will help higher education, Mr Mukherjee said taxpayers can now deduct the interest paid on education loans availed for those under their legal guardianship. Earlier the benefit was available only on loans taken for the benefit of the taxpayer, spouse and children.

Also, the minister said the eligible deductions for assessees with severe disability will be raised from Rs 75,000 to Rs 1 lakh for purposes of income tax. Firms engaged in processing, preservation and packaging of meat, poultry, marine and dairy products have also been given exemption from tax on their profits.

The new services brought under service tax in Finance Bill 2009—those in relation to transport of goods by rail and inland water, coastal goods, legal consultancy, cosmetic and plastic surgery—will come into force only from September 1, 2009. The government also extended the tax holiday earlier proposed for natural gas production from blocks licensed under the eighth round of the national exploration licensing policy (Nelp-VIII) to natural gas production from blocks licensed under the fourth round of bidding for exploration of coal bed methane as well.